China Tax Alert - Issue 11, June 2013
On 28 April 2013, the State Administration of Foreign Exchange announced the release of Administrative Measures for Foreign Debt Registration (Circular 19). Circular 19 seeks to simplify foreign debt registration procedures, which remove certain approval requirements. With the exception of registering foreign debt contracts, other actions such as opening foreign debt accounts and foreign currency settlements and repayments can now be handled directly by designated foreign exchange banks. We envisage that the timeline for processing foreign currency settlements on foreign debt should be shortened for many foreign investment enterprises.
On the other hand, banks will be required to perform more compliance reviews of the foreign currency settlements application. Since the process and the required documentations may vary across different banks, FIEs should keep in regular contact with banks, prepare complete documentation supporting the usage of funds from foreign currency settlements.